The US-China trade war increases risks for the global economy

WASHINGTON – The trade war that erupted on Friday between the United States and the United States China carries a major risk of escalation The knockouts were fired just after midnight, when the Trump administration imposed a 25% tariff on 34 billion dollars worth of imports from China, and Beijing quickly fought back rights on an equal amount of US products. Because of this first round of hostilities, US companies and, ultimately, consumers could end up paying more for products made in China such as construction equipment and others. machinery. And US suppliers of soy, pork and whiskey could lose their competitive edge in China.

These initial tariffs are unlikely to inflict serious damage on the two largest economies in the world. Gregory Daco, head of the US economy at Oxford Economics, calculated that growth in both countries would not be higher than 0.2% until 2020.

But the conflict could soon escalate. President Donald Trump, who prides himself on winning a trade war, says he is ready to impose tariffs on $ 550 billion of Chinese imports, a figure that exceeds $ 506 billion shipped by the United States. China in the United States last year.

The escalation of tariffs is expected to slow down business investment, companies waiting to see if the administration can conclude a truce with Beijing. Some employers will likely put hiring on hold until the picture becomes clearer. The damage could risk canceling some of the economic benefits of the tax cuts last year.

"Trade disruption is the biggest threat to global growth," said Dec Mullarkey, chief investment officer, Sun Life Financial. "The direct effects will be magnified when business confidence declines and investment decisions are delayed." The markets are still hoping the key players will return to the negotiating table. "

The root of the conflict is Trump's statement that China has long used predatory tactics to try to supplant US technological supremacy These tactics include cyber-theft as well as forcing companies to cede technology in exchange access to the Chinese market Trump's tariffs are intended to push Beijing to change its habits

The conflict with China is the most important trade dispute that the administration has caused. It's not the only one.

Trump is also fighting with the European Union for its threat to tax auto imports and with Canada and Mexico for its attempt to rewrite the North American trade pact. And he has submitted most of America's trading partners to tariffs on steel and aluminum.

Many, caught in the initial line of fire – the American farmers who are absorbing tariffs on their exports to China, for example – are scared. Soybean prices fell 13 percent last month, fearing that Chinese tariffs will reduce US farmers in China, which buys about 60 percent of their soybean exports.

"For soybean producers like me to hit," said Brent Bible, a soybean and corn producer in Romney, Indiana. "These rates could make the difference between a profit and a loss for a whole year of field work, and that's only in the short term."

Christine LoCascio, a director of the Distilled Spirits Council, said she feared that Chinese tariffs on American whiskey "put a damper on American success" of growing exports of American spirits.

Even before the first shots, the prospect of a trade war worried investors. The Dow Jones Industrial Average has lost hundreds of points since June 11. But the risks are now taken into account in the market, and the Dow Jones rose nearly 100 points Friday to 24,456.48 [19659005] the dollar over the past month, giving Chinese companies an edge over their US competitors. The decline could reflect a deliberate devaluation by Beijing to signal its "dissatisfaction with the state of trade negotiations," according to a report by the Institute of International Finance, a banking business group.

The Trump administration sought to limit the impact of tariffs on US households by targeting Chinese industrial products, not consumer products, for the first set of tariffs

But this step Increases costs for US companies that use machines or components made in China. And this could force them to pass on these higher costs to their business customers and eventually to consumers.

If you like Chick-fil-A sandwiches, for example, you can feel the effects. Charlie Souhrada of the North American Food Equipment Manufacturers said the rates could increase the cost of a kind of pressure cooker uses Chick-fil-A.

The administration placed "these taxes on the import squarely on the shoulders of the manufacturers and, by extension Consumers," said Souhrada

Tariffs will weigh on farmers, landscapers and construction companies by increasing the price of excavators and loaders manufactured by Bobcat, which uses accessories imported from China. US suppliers rarely manufacture these attachments, so the company has to import them.

Jason Mayberry, Bobcat's Deputy General Counsel, said in a brief submitted to the US Trade Representative's office that the company should raise its rates. Bobcat's raw material costs have also increased due to steel and aluminum pricing in the administration.

The Federal Reserve learns that the trade war forces companies to rethink their investment plans. In the minutes of its June meeting, the Fed noted that some companies have delayed or curtailed their plans to purchase or upgrade equipment.

And if Trump expands tariffs to 550 billion dollars of Chinese imports, consumers will not be able to avoid getting caught in the crossfire: taxes would hit products like televisions and cell phones [19659005That'swhathappenedtoimportedwashingmachineswhichwerehitbyseparateTrumptariffsinJanuaryOverthepastyeartheirpricehasjumpedover8%

US trade groups urge both countries to resume talks

"Tariffs will lead to retaliation and perhaps more tariffs". National Association of Manufacturers. "No one wins in a trade war."

– Associated Press